Circular of the Chinese Ministry of Commerce on issues related to handling the Certificate of Confirmation for Domestic and Foreign Capital Projects E

Circular of the Chinese Ministry of Commerce on issues related to handling the Certificate of Confirmation for Domestic and Foreign Capital Projects Encouraged by the State for Development for foreign-invested enterprises



To departments in charge of commerce of all provinces, autonomous regions, municipalities, cities directly under central planning and the Xinjiang Production & Construction Corps
In response to questions from many local departments in charge of commerce on the work of issuing certificates of confirmation for duty exemption, the ministry has given a definite reply in its Reply of the Ministry of Commerce to Related Issues in Handling the Certificate of Confirmation for Duty Exemption for Foreign-Invested Enterprises of the Encouraged Category (MOC Document No. 41, 2006).

In order to further standardise the operational procedures for duty exemption on equipment imported by foreign-invested enterprises, make clear the specific requirements for foreign-invested enterprises to handle the Certificate of Confirmation for Domestic and Foreign Capital Projects Encouraged by the State for Development and the Certificate for Foreign-Invested Enterprises to Import Upgrading-Purpose Equipment, Technology and Spare Parts (hereinafter referred to as the "Certificate of Confirmation" and the "Certificate for Import"), related issues are hereby notified as follows pursuant to the spirits of related documents such as the Law on Sino-Foreign Equity Joint Ventures, the Law on Sino-Foreign Contractual Joint Ventures, the Law on Foreign Capital Enterprises, the Circular of the State Council on Adjusting Taxation Policies for Imported Equipment (Document No. 37, 1997 and hereinafter referred to as the "No.37 document"), and the Circular on Implementing Issues to the State Council's Adjustment of Taxation Policies Related to Imported Equipment (DocumentNo.250, 1998).

1. Basic Principles

Since the State Council decided to issue the Certificate of Confirmation for foreign-invested projects in the encouraged category in 1998 and the Certificate for Import for qualified foreign-invested enterprises in 1999, related departments of the State Council have issued a series of documents (see the Reply of the Ministry of Commerce to Related Issues in Handling the Certificate of Confirmation for Duty Exemption for Foreign-Invested Enterprises of the Encouraged Category, MOC Document No. 41, 2006) to make clear the departments to issue the Certificate of Confirmation and the Certificate for Import, and the specific operational measures related to the procedures, basis and implementation.

In principle, the certificate of confirmation for foreign-invested projects in the encouraged category should be issued by the development planning, economic and trade, and foreign economic and trade authorities, of which, certification for projects above quota limit should be issued by the National Development and Reform Commission and the Ministry of Commerce respectively, and those within the quota limit should be handled by competent departments of the provincial level government according to the current division of labour and limit of authority.

All localities should continue to follow the aforesaid stipulations and operational measures to ensure steady operation of the work to issue the certificate of confirmation and the import certificate and the operational procedures for import.

2. The scope for the departments in charge of commerce to issue the certificate of confirmation and the import certificate

(1) the certificate of confirmation for foreign-invested enterprises in the encouraged category that should be examined and approved once by the Ministry of Commerce or the local department in charge of commerce (foreign economic relations and trade) pursuant to the Law on Foreign Capital Enterprises and its Implementing Rules;

(2) the certificate of confirmation for capital expansion projects of foreign-invested enterprises in the encouraged category that should be approved by the department in charge of commerce (foreign economic relations and trade) pursuant to the Law on Sino-Foreign Equity Joint Ventures, the Law on Sino-Foreign Contractual Joint Ventures and the Law on Foreign Capital Enterprises and their Implementing Rules;

(3) the certificate of confirmation for foreign-invested stock limited companies in the encouraged category;

(4) the certificate of confirmation for foreign-invested enterprises in the encouraged category in the service trade fields;

(5) the certificate of confirmation for foreign-invested enterprises in the encouraged category that are established through the form of M&A by foreign investors;

(6) the certificate of confirmation for foreign-invested R&D centres to import self-use equipment and their supporting technology, fittings and spare parts that could not be manufactured domestically or whose functions were unable to meet the needs within the total amount of investment;

(7) the certificate of confirmation for foreign-invested enterprises in the encouraged category that are determined independently by departments in charge of commerce in line with their local characteristics for the purpose of improving the investment environment and simplifying the approval procedures;

(8) other certificates of confirmation that should be issued by departments in charge of commerce pursuant to stipulations of laws and regulations;

(9) the import certificate for already established foreign-invested enterprises in the encouraged category and limited B-category, foreign-invested R&D centres and foreign-invested enterprises of advanced technology and export-oriented product categories (hereinafter referred to as the "five categories of enterprises") to import with own funds beyond the total amount of investment within the originally approved scope of business and for the purpse of technical upgrading self-use equipment and their supporting technology, fittings and spare parts that could not be manufactured domestically or whose functions were unable to meet the needs within the total amount of investment.

3. The Procedures for handling the certificate of confirmation and the certificate for import issued by the Ministry of Commerce

(1) A foreign-invested enterprises that should have the Ministry of Commerce issue the certificate of confirmation (hereinafter referred to as "enterprise above quota limit"), shall have its written application submitted to the Ministry of Commerce via the provincial level department in charge of commerce.

A. The local department in charge of commerce and the enterprise above quota limit shall present the following documents:

(a) the request for applying for the certificate of confirmation and the certificate for import submitted by the local department in charge of commerce;

(b) the explanation of the enterprise above quota limit when applying for the certificate of confirmation and the certificate for import;

(c) the document of approval for establishment, the document of approval and the business license (both being duplicate), and the records for passing the united annual examination of the enterprise above quota limit;

(d) the duplicate of the capital verification report;

(e) a sheet of the imported equipment in triplicate sealed by the provincial level department in charge of commerce and the enterprise above quota limit;

(f) other documents as required by the Ministry of Commerce.

If any of the five categories of enterprises applies for the certificate for import for the first time, it shall also submit its audited report for the preceding year (duplicate sealed by the enterprise) and other documents, and an explanation of the total amount of own money (specifically referring to the enterprise's reserve fund, development fund, depreciation and after-tax profit) beyond the total amount of investment.

B. The provincial level department in charge of commerce shall make initial examination of the enterprise above quota limit's amount of exchange use, term of implementation (in principle not to exceed the construction period of the enterprise), the sheet of imported equipment, the clauses for applicable industrial policies, and the total amount of own funds, and also specify the opinions of initial examination in the written application.

C. The Ministry of Commerce shall conduct examination within ten working days after receiving the written application submitted by the provincial level department in charge of commerce. If it complies with stipulations of state laws, the Ministry of Commerce shall issue the certificate of confirmation or the certificate for import in triplicate, and also affix it on the sheet for imported equipment, and at the same time send a copy to the General Administration of Customs and the local customs. If it does not comply with the state laws, the Ministry of Commerce shall give a written opinion and also state the reasons.

D. Before importing equipment, an enterprise above quota limit shall handle the tax reduction and exemption record procedures with the local customs where the enterprise is located by presenting the certificate of confirmation or the certificate for import and related documents.

(2) Alteration procedures for the related certificate of confirmation of enterprises above quota limit

A. If after the Ministry of Commerce issues the certificate of confirmation main items such as total amount of investment, amount of exchange use and term of implementation need to be altered during the course of implementation, an application for alteration shall be submitted to the Ministry of Commerce after initial examination of the altered contents and the causes by the provincial level department in charge of commerce, together with the attachment of the following documents:

(a) the original certificate of confirmaion and the records for passing united annual examination;

(b) documents to explain the adjusted matters;

(c) a duplicate of the capital verification report;

(d) other documents as required by the Ministry of Commerce.

B. The Ministry of Commerce shall conduct examination within five working days after receiving the written application. If it complies with stipulations of state laws, the Ministry of Commerce shall issue the altered certificate of confirmation in triplicate, and at the same time send a copy to the General Administration of Customs and the local customs. If it does not agree to the alteration, the Ministry of Commerce shall give a written opinion and also state the reasons.

C. The enterprise above quota limit shall handle the alteration procedures with the local customs where the project is located by presenting the certificate of confirmation and other related documents.

(3) Principles for Examining the Sheet of Imported Equipment

The sheet of equipment imported by a foreign-invested enterprise shall in principle be presented together with the certificate of confirmation or the certificate for import, and be affixed by the Ministry of Commerce the special seal for imported equipment. The sheet of imported equipment in the certificate of confirmation shall be self-use equipment imported within the total amount of investment by the foreign-invested enterprise and the technology, fittings and spare parts imported together with the equipment. The equipment listed on the sheet of imported equipment in the certificate for import shall be self-use equipment and their supporting technology, fittings and spare parts that could not be produced domestically or whose functions are unable to meet the needs.

For a foreign-invested enterprise that involves a big import scale, a long construction period and is unable to determine all imported equipment at the time when the certificate of confirmation is issued, it may submit written applications to the Ministry of Commerce via local department in charge of commerce in batches, and the Ministry of Commerce will confirm and affix the special seal for imported equipment in batches.

4. Handling procedures for local department in charge of commerce to issue the certificate of confirmation and the certificate for import

(1) The provincial department in charge of commerce is responsible for the work of issuing the certificate of confirmation and the certificate for import of foreign-invested enterprises approved by the local department in charge of commerce (hereinafter referred to as "enterprise within quota limit".

(2) The provincial department in charge of commerce shall handle the certificate of confirmation and the certificate for import in accordance with the procedures stipulated in this Circular. The certificate of confirmation and certificate for import issued by a provincial level department in charge of commerce shall be reported to the Ministry of Commerce for record within one month.

5. Related principles for issuing the certificate of confirmation and the certificate for import

(1) The following principles shall be followed when issuing the certificate of confirmation:

A. If an enterprise not reaching capacity applies for the certificate of confirmation, the duty exemption quota shall be: total amount of investment (amount of expanded capital) less amount of capital investment less amount of procurement of domestically manufactured equipment and others less working funds of the enterprise less non-cash capital contributions by the Chinese and foreign parties (excluding capital contribution with equipment).

B. If the business scope of the foreign-invested enterprises involves both the encouraged category and the permitted or limited category, the application for the certificate of confirmation and the attached sheet of imported equipment shall include only self-use equipment used under the account of business scope in the encouraged category and the related techology, fittings and spare parts imported together with the equipment according to the contract. The equipment imported under the account of the business scope in the permitted and limited categories shall not be included in the application and the sheet.

(2) The following principles shall be followed in issuing the certificate for import

A. All localities shall issue the certificate for import to the five categories of enterprises strictly according to the requirements of the Circular on Issues Related to Equipment Imported by Foreign-Invested Enterprises (Document No. 478, 2000) issued by the former Ministry of Foreign Trade and Economic Cooperation and the Circular on Taxation Policies for Further Encouraging Foreign Investment (Document No, 791, 1999) issued by the General Administration of Customs.

B. The departments in charge of commerce in all localities shall set up databanks of "own funds" and after issuing the certificate for import to an enterprise, the amount of "own funds" of the said enterprise shall be deducted accordingly. When an enterprise in the five categories of enterprises applies for the certificate for import again, the quota for duty exemption shall not exceed the amount of the "own funds" after deduction. "Own funds" newly increased by an enterprise after the issuance of the certificate for import may be taken as the "own funds" of the enterprise and related certification documents shall be presented at the time of application.

C. For a foreign-invested enterprise established in the form of M&A, the following principles shall be followed when issuing the certificate of confirmation and the certificate for import:

(a) if the merged enterprise has reached capacity, the certificate of confirmation shall in principle no longer be handled;

(b) if the foreign investor merges with a domestic enterprise in the form of capital expansion, and also increases new capacity to expand its production capacity, the department in charge of commerce shall issue the certificate of confirmation with regard to the part of capital expansion pursuant to the principles stipulated in the first paragraph of article 5;

(c) if the foreign-invested enterprise established after M&A belongs to the five categories of enterprises, the certificate for import shall be handled according to stipulations related to "own funds" beyond the total amount of investment for the five categories of enterprises, and the said "own funds" shall be "own funds" newly born of the foreign-invested enterprise after merger. The enterprise shall present to the department in charge of commerce the related certification documents and explanations.

D. All provincial departments in charge of commerce shall strictly implement related stipulations and may not extend the scope of application in the items of the encouraged category and unlawfully issue the certificate of confirmation and the certificate for import. For enterprises failing to comply with the state's requirements on environmental protection, neither a certificate of confirmation nor a certificate for import shall be issued.

E. The Ministry of Commerce will strengthen its supervision and guidance of the work in handling the certificate of confirmation for enterprises within quota limit. Those failing to make record in time according to stipulations or those issuing the certificate of confirmation or the certificate for import in violation of the stipulations will be ordered to make correction or cancelled. If the case is serious, the qualification for issuing the certificate of confirmation and the certificate for import will be revoked, and in cooperation with the General Administration of Customs, the Ministry of Commerce will inform related customs to stop handling the related duty exemption procedures for import.

6. The Circular is applicable to enterprises invested by Taiwan, Hong Kong and Macao investors.

7. The Circular shall take effect as of the date of its promulgation, and the Ministry of Commerce is responsible for its interpretatin. If there is any problem during the course of implementation, please contact the Ministry of Commerce (foreign investment department) without delay.


Ministry of Commerce of the People's Republic of China